In a Proportionate Current (Nonliquidating) Distribution of His 30% Interest

question 228

Essay

In a proportionate current (nonliquidating) distribution of his 30% interest in the MNO LLC, Neil received cash
($60,000), land (basis of $40,000 and value of $75,000), and unrealized receivables (basis of $0 and value of
$22,000). In addition, Neil is relieved of his $40,000 share of the LLC's liabilities. Neil's basis in MNO (including his share of LLC liabilities) was $80,000 immediately prior to this distribution.

a. How much gain or loss does Neil recognize on this distribution?
b. What is Neil's basis in the receivables and land he receives in the distribution?
c. What is Neil's basis in the LLC interest following the distribution?

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Definitions:

Overextension

In language acquisition, overextension is children's use of words in a broader context than adults would, applying specific words to a wider variety of objects or situations.

Rehearsal

A cognitive process involving the repeated review or practice of information to aid in its retention in memory.

Self-Awareness

Understanding of one's personal attributes, feelings, driving forces, and aspirations.

Comprehension

The ability to understand and process language or information, grasping the meaning of text, speech, symbols, or behavior.